Hybrid financial product

Abstract

Disclosed is a hybrid financial security. The security is structured as a collateralized debt obligation which contains senior notes and income notes. Proceeds from the sale of the notes are utilized to purchase the underlying collateral, which is below investment grade debt obligations. The hybrid financial security has improved liquidity, lower volatility, and a shorter maturity term than a traditional collateralized debt obligation.

1 . A hybrid financial security comprising: 
 at least one senior note comprising a principal payment and an interest payment;    at least one redeemable income note comprising an interest payment;    collateral comprising at least 90% lower than investment grade debt obligations;    a market value asset coverage test;    an initial leverage ratio determined by said senior note and said redeemable income note;    wherein said senior note and said redeemable income note generate revenue which is utilized to purchase said collateral; and    wherein said collateral generates revenue which is utilized to pay said principal payment, said senior note interest payment, and said income note interest payment subject to said market value asset coverage test.    
     
     
         2 . The hybrid financial security of  claim 1 , wherein said at least one senior note is rated as investment grade by a ratings agency.  
     
     
         3 . The hybrid financial security of  claim 1 , wherein said lower than investment grade debt obligations comprises at least one selected from the group consisting of floating rate bank loans, senior secured bonds, and combinations of two.  
     
     
         4 . The hybrid financial security of  claim 1 , further comprising a reinvestment event.  
     
     
         5 . The hybrid financial security of  claim 1 , wherein said leverage ratio is about 3:1.  
     
     
         6 . The hybrid financial security of  claim 1 , further comprising a non-call period.  
     
     
         7 . The hybrid financial security of  claim 6 , wherein said non-call period is two years.  
     
     
         8 . The hybrid financial security of  claim 1 , further comprising a stated maturity.  
     
     
         9 . The hybrid financial security of  claim 8 , wherein said stated maturity is seven years.  
     
     
         10 . The hybrid financial security of  claim 1 , wherein said collateral is managed by a collateral manager.  
     
     
         11 . A structured investment, comprising a collateralized debt obligation structure in which the portfolio of hybrid securities defined in  claim 1  defines the asset class in the collateralized debt obligation.  
     
     
         12 . A method of providing revenue to an investor comprising the steps of: 
 creating a hybrid financial instrument comprising: 
 at least one senior note comprising a principal payment and an interest payment;  
 at least one redeemable income note comprising an interest payment;  
 collateral comprising at least 90% lower than investment grade debt obligations;  
 a market value asset coverage test;  
 an initial leverage ratio determined by said senior note and said redeemable income note;  
   offering said hybrid financial instrument to an investor;    purchasing of said senior note or said income note by an investor;    utilizing proceeds from said purchase of said senior note or said income note to purchase collateral;    generating revenue from said collateral; and    paying said revenue to said investor; 
 wherein said market value asset coverage test is utilized to determine the manner and amount of revenue paid to said investor.  
   
     
     
         13 . The method of  claim 12 , wherein said at least one senior note is rated as investment grade by a ratings agency.  
     
     
         14 . The method of  claim 12 , wherein said lower than investment grade debt obligations comprises at least one selected from the group consisting of floating rate bank loans, senior secured bonds, and combinations of two.  
     
     
         15 . The method of  claim 12 , further comprising a reinvestment event.  
     
     
         16 . The method of  claim 12 , wherein said leverage ratio is about 3:1.  
     
     
         17 . The method of  claim 12 , further comprising a non-call period.  
     
     
         18 . The method of  claim 17 , wherein said non-call period is two years.  
     
     
         19 . The method of  claim 12 , further comprising a stated maturity.  
     
     
         20 . The method of  claim 19 , wherein said stated maturity is seven years.  
     
     
         21 . The method of  claim 12 , wherein said collateral is managed by a collateral manager.